FANRPAN Policy Brief Series 11/07

The potential of using an input voucher system to integrate the commercial and non-commercial input distribution systems in the Southern African Development Community 

FANRPAN Policy Brief Series 11/07Direct input distribution through relief and government programs is costly, leads to the creation of two parallel input distribution systems, crowds out private sector development, and often the benefits do not reach those most in need. An input voucher system is an innovative way of integrating the commercial and non-commercial input distribution channels and can be used to enhance the purchasing power of the poor. In addition, the commercial sector can redeem these vouchers and expand its distribution network into the rural areas. 

Smallholder farmers in southern Africa use low purchased-input technologies and as a result, produce low yields and face chronic food insecurity for two to five months of the year. The problems such households face are compounded by natural calamities such as droughts and floods. These households therefore need programs to increase their agricultural productivity and improve their food security.

To enhance food security at household and national levels, governments in the region often implement programs such as input subsidies on fertilizers and seeds. In times of drought and floods, governments, Non-Governmental Organizations (NGOs) and relief agencies also distribute outright relief seed and fertilizer inputs to the smallholder farmers. 

The distributed relief seeds and fertilizer lead to the creation of two parallel markets, one involving the non-commercial or relief market and the other the formal commercial market utilized by private companies. The problem with relief markets is that they crowd out private sector development, which is a serious deterrent to the long-term development of a country. Thus, it is imperative to determine feasible and practical ways of integrating the two distribution channels using a voucherbased system so that the private sector is a major player in all marketing and distribution activities.